GDP growth slows to 6.1 per­cent in 3rd quar­ter

Cebu Daily News - - OPINION - Per­ry­fa­jardo@ya­hoo.com

As re­ported yes­ter­day by the Philip­pine Sta­tis­tics Author­ity (PSA), the coun­try’s Gross Do­mes­tic Prod­uct (GDP) grew by 6.1 per­cent in the third quar­ter, down from 7.3 per­cent in the same quar­ter of last year and the re­vised 6.2 per­cent growth in the se­cond quar­ter of this year.

On the pro­duc­tion or sup­ply side, Ser­vices, which ac­counts for 59.3 per­cent of the GDP, recorded the fastest growth at 6.9 per­cent in the third quar­ter. How­ever, this was down from 7.3 per­cent in the same quar­ter of last year though higher than the 6.8 per­cent growth in the se­cond quar­ter of this year. In­dus­try, with 33.4 per­cent of the GDP, was next with 6.2 per­cent. This was down from 6.5 per­cent growth in the se­cond quar­ter and from the pre­vi­ous year’s third quar­ter 8.1 per­cent growth. Agri­cul­ture, which ac­counts only for 7.3 per­cent of the GDP, de­clined by 0.4 per­cent.

Mean­while, im­ports went up by 18.9 per­cent while ex­ports grew only by 14.3 per­cent. This re­sulted in nega­tive net ex­ports of about 10 per­cent of the GDP. Nega­tive net ex­ports will push the GDP lower while pos­i­tive net ex­ports will push it higher.

On the ex­pen­di­tures or de­mand side, growth was driven by cap­i­tal for­ma­tion or in­vest­ments, which grew at 16.7 per­cent, and by govern­ment fi­nal con­sump­tion ex­pen­di­tures with 14.3 per­cent. Con­sump­tion grew only by 5.2 per­cent, down from 5.9 per­cent in the se­cond quar­ter and from 5.4 per­cent in the pre­vi­ous year.

With the coun­try’s pro­jected pop­u­la­tion reach­ing 106.6 mil­lion in the third quar­ter of 2018, per capita GDP grew by 4.4 per­cent.

The 6.6 per­cent GDP growth in the 1st quar­ter, 6.2 per­cent in the 2nd quar­ter, and 6.1 per­cent in the 3rd quar­ter im­plies that it will take a heroic 9.1 per­cent GDP growth in the 4th quar­ter for the govern­ment to achieve its orig­i­nal 7 per­cent GDP growth tar­get for the year.

Reach­ing that is not pos­si­ble with in­fla­tion still high that con­tin­ues to dis­cour­age con­sump­tion, the in­crease in in­ter­est rates that also dis­cour­ages in­vest­ments, and given fur­ther the un­cer­tain­ties in global trade as af­fected by the USChina trade war. With these, GDP growth might in fact go deep below 6 per­cent in the 4th quar­ter or stay close to it.

To boost the econ­omy, the govern­ment may just have to spend more like what it had been do­ing in the first three quar­ters as fi­nal house­hold con­sump­tion ex­pen­di­ture growth is still con­strained by the Train-in­duced in­fla­tion. Govern­ment spend­ing more than be­fore, how­ever, may also lead to much larger govern­ment deficits and to higher in­fla­tion rate.

As for the BSP, this time, it may just have to stop rais­ing the in­ter­est rate to fight in­fla­tion since more or less, in­fla­tion had al­ready reached its peak last month. To raise the in­ter­est rate fur­ther may only make new in­vest­ments less prof­itable. It, there­fore, must be avoided to avoid slow­ing down GDP growth.

What is GDP? How is it mea­sured? This will be my sub­ject next week, hope­fully.

Govern­ment spend­ing more than be­fore, how­ever, may also lead to much larger govern­ment deficits and to higher in­fla­tion rate.

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